China has agreed to allow Japan to raise a suspected North Korean spy ship that sank in the Chinese-controlled waters after being fired upon by the Japan Coast Guard, a major Japanese newspaper reports.

China and Japan had been at odds over the fate of the suspected Pyongyang vessel since the ship went down last December, apparently with the loss of all on board. The ship sank in China's exclusive economic zone in the East China Sea after exchanging fire with the Japanese coast guard. Tokyo suspects the ship had intruded into its waters on a spying or a drug-smuggling mission for North Korea, which denies the charges.

The Mainichi Shimbun newspaper reports Japan believes that China approved the raising of the mystery ship after a meeting Friday between Japanese Prime Minister Junichiro Koizumi and Chinese Premier Zhu Rongji on southern China's Hainan Island.

The Mainichi quotes unidentified Japanese government officials as saying the salvage operation could begin this week. When and how to pull the sunken ship up to confirm its origin has been a sensitive diplomatic issue between Japan and China, North Korea's traditional ally.

China initially was reluctant to allow Japan to act within Beijing's exclusive economic zone. Chinese Foreign Minister Tan Jiaxuan suggested early last month that Japan should not raise the sunken ship on its own.

But the two countries apparently struck a compromise when Chinese National People's Congress chief Li Peng visited Japan earlier this month and said Beijing wanted to "find a solution that satisfies both Japan and China."

The Mainichi newspaper reports Chinese Premier Zhu sent more positive signals during his meeting Friday with Japanese Prime Minister Koizumi, on the sidelines of the Boao business forum for Asian countries on China's Hainan Island.

In talks with Mr. Koizumi, Premier Zhu said he believes China and Japan would "find a solution" over the rogue ship issue. The daily said Japan will begin an undersea probe into damage to the ship's hull as early as next Saturday.

Prime Minister Koizumi's decision to attend the Boao meeting and lend Japan's credibility to the gathering comes at a time when Tokyo and Beijing are making efforts to minimize their differences over issues dating from their wartime past. A 200-member delegation from Japan's ruling coalition is in Beijing this weekend to mark the 30th anniversary of the normalization of Sino-Japanese ties.